CALIFORNIA: Proposed budget surges to record high

Gov. Jerry Brown introduces his 2014-15 budget proposal at the State Capitol in Sacramento on Thursday, Jan. 9, 2014. Brown proposed a $106.8 billion general fund budget, the largest in state history, and an 8.5 percent increase from current spending, as state coffers brim with additional tax revenue.

SACRAMENTO, Calif. (AP) â" A robust economic recovery and surging
revenue propelled by voter-approved tax increases have sent Californiaâs general
fund spending to a record high, marking a dramatic turn-around from the stateâs
days as the nationâs poster child of fiscal dysfunction.

Yet Gov. Jerry Brown, in releasing his budget proposal Thursday,
pledged to take a somber approach in spending the windfall. He said California
must begin paying down what he has called its massive âwall of debt,â a stew of
unfunded liabilities, bond debt and borrowing that is estimated at $355 billion.

His somewhat cautious approach will run afoul of some of his
fellow Democrats in the Legislature, many of whom already are clamoring for
higher spending on pet programs.

âWhen youâre at this level of long-term liability, it isnât time
to just embark on a raft of new initiatives,â Brown said in announcing details
of his budget during a Capitol news conference.

The news conference was moved up a day after copies of his budget
proposal were leaked to media outlets late Wednesday. He was scheduled to
promote his budget plan later Thursday in San Diego and Los Angeles.

The governorâs budget proposal for the 2014-15 fiscal year
dedicates $11 billion to paying down debts and liabilities, including $6 billion
in payments that had been deferred to schools and nearly $4 billion to pay down
the so-called economic recovery bonds left over from the administration of Gov.
Arnold Schwarzenegger.

It does not address long-term liabilities in the stateâs teacher
retirement fund, which will require billions of dollars extra a year to make
solvent. Instead, Brown said he wants to create a plan for long-term solvency
this year. The teachersâ pension fund is estimated to be $80 billion in the red.

The record $106.8 billion general fund exceeds the spending level
of just before the recession by more than $3 billion and is a nearly 9 percent
increase over spending in the current fiscal year.

The governor also sets aside $1.6 billion for a rainy day fund to
protect against future downturns, saying âwisdom and prudence should be the
order of the day.â

Californiaâs financial turnaround is due in large part to
temporary increases in the state sales tax and income taxes for the wealthy that
were approved by voters in 2012. Combined, those tax increases are expected to
generate about $6 billion a year.

The state also has been adding jobs at one of the fastest rates
in the nation since the recovery from the recession began, led by the technology
sector.

The stateâs legislative analyst forecasts that California will
have a $3.2 billion operating surplus by the end of the fiscal year, one that is
expected to approach $10 billion within three years.

Brown has warned against spending all the surplus on new programs
or to restore services cut during the recession, saying the state needs to
prepare for future recessions and get control of its debts.

âNow some people would say, because we have this little black
mark there, that we should go on a spending binge,â he said, pointing to a chart
showing this yearâs surplus. âI donât agree with that. We see the lessons in
history.â

That approach appeals to minority Republicans, who generally
praised the budget while warning against spending pressure from Democratic
lawmakers in the months ahead.

Join the conversation

Keep it civil and stay on topic. No profanity, vulgarity, racial slurs or personal attacks. People who harass others or joke about tragedies will be blocked. By posting your comment, you agree to allow Freedom Communications, Inc. the right to republish your name and comment in additional Freedom publications without any notification or payment.